The Uncertain Future Of Amazon’s B2B Influence

The behemoth that is Amazon has not limited its sphere of influence to the consumer shopping arena. As personal buying habits proliferate into the corporate world, businesses have spent the last decade pursuing the Amazon-like procurement experience, driving demand for online efficiency, clear product discovery and description, transparent pricing, fast delivery and more.

Amazon itself is well-positioned in the B2B eCommerce market: Earlier this month, analysts at Royal Bank of Canada (RBC) Capital Markets predicted that Amazon Business, an often “ignored” unit of Amazon operations, is an unsung powerhouse for the conglomerate.

“We believe Amazon Business has largely been ignored by investors,” said RBC Capital Markets Analyst Mark Mahaney at the time, with RBC Capital Markets also predicting that Amazon Business will surpass $30 billion in revenues by 2023.

Amazon has disclosed that its B2B unit is growing more quickly than its Retail and Amazon Web Services operations, with Mahaney saying that Amazon Business “continues to gain market share, while also triggering seismic changes to eCommerce business models across the industrial distributor landscape.”

While it’s undeniable that Amazon has forever changed the way consumers and businesses make, pay for and receive purchases, Jake Schwarzbaum, co-founder of eCommerce-as-a-Service firm Velocity Sellers, warned that Amazon’s path to B2B eCommerce glory isn’t without resistance. He told PYMNTS about his forecast for Amazon’s future position in the B2B market, as well as what the industry can expect in 2020.

An Evolving Model

While the last decade of innovation resulted in more choices for businesses to buy and sell to each other online, and with automated processes, paper and fax remain commonplace in eProcurement and B2B eCommerce today. Next year, said Schwarzbaum, the gradual shift away from manual processes will continue, with benefits for both buyers and sellers.

“An increased focus on online ordering, as well as new ease-of-use features from marketplaces, will shift B2B sellers away from emails, fax and phone-ordering,” he said. “Well-optimized online content allows [for] more consistent upselling and less manpower, which cuts costs and increases average order size.”

Unfortunately, however, 2020 will inevitably see more of the same, as corporates — particularly larger firms averse to change — stay stuck on outdated tools and processes. Schwarzbaum said 2020 will also entail the challenge of these businesses figuring out best practices for ordering products and services online, with vendors working to assess how the online sales model can positively impact their performance.

The B2B eCommerce arena will continue its drive toward the Amazon-like experience. That not only means discovering and purchasing goods online, noted Schwarzbaum, but the drive for speedy delivery will also continue — with profound impact on how corporates strategize their purchasing habits. The number of transactions will continue to increase next year as well, he added, but the size of those transactions is likely to decline.

“With fast delivery times and lower shipping costs, B2B purchasers will move to order smaller quantities more frequently, so that they do not over-purchase or over-leverage inventory, but ensure products stay in stock,” he said.

Furthermore, the B2B eCommerce landscape will face growing pressure to adopt integrated payments and finance capabilities, allowing businesses to pay for all the goods they purchase online on a single platform. Going a step further, that transaction data must be able to integrate into back-office platforms for both buyers and sellers, he noted.

The Amazon Target?

These trends — online product discovery and purchase, integrated payments, faster delivery and more — all stem from disruption introduced by Amazon’s consumer eCommerce offering. Schwarzbaum expects Amazon’s influence on B2B eCommerce to continue, with businesses and governments alike increasing their adoption of eMarketplaces like Amazon to conduct trade.

That’s good news for companies like Velocity Sellers, which works with vendors to optimize their strategies on the Amazon platform itself, as well as other eMarketplaces. Yet, while analysts predict a lucrative future for Amazon’s B2B operations, Schwarzbaum warned that the company will also face significant challenges in the year ahead.

“Amazon has a target on its back,” he said, pointing to recent developments that have challenged the technology conglomerate’s position in the market.

In government procurement, for instance, the U.S. Pentagon’s decision to award a $10 billion cloud services contract to Microsoft over Amazon Web Services in October raised eyebrows, and led to criticism from Amazon — as well as a legal complaint against the government.

Schwarzbaum also highlighted governments, including the U.S.’ recent exploration of breaking up technology giants like Amazon, with the Federal Trade Commission — among several government entities around the world — reviewing the company’s market share. Amazon, however, appears unfazed.

“Substantial entities in the economy deserve scrutiny, and our job is to build the kind of company that passes that scrutiny,” said Amazon’s Worldwide Consumer CEO Jeff Wilke in a statement earlier this year.

It’s unclear whether challenges to Amazon’s market position will impact the company’s growth, or affect its influence on the B2B eCommerce market in particular. What is clear, though, is that the B2B eCommerce space is changing, with Schwarzbaum even predicting that “brick-and-mortar will make a comeback” — as B2B brands follow suit to the likes of Casper and Peloton, embracing a direct-to-business model, and “using their physical retail location[s] to create an experience that complements their online presence.”

That’s a far cry from the “Amazon experience” that the B2B community has touted in years past. At the same time, however, the continued growth of B2B eCommerce digitization means more Amazon-like experiences — as well as continued adoption of Amazon itself for businesses to conduct B2B trade.